S.O. from New Jersey writes:
Dear Mister Condo,
My wife and I are about to lose our townhome in a foreclosure. We were both out of work for several months and have been struggling to make ends meet ever since. We were able to pay back the $1800 we owed to the HOA for the four common fee payments we missed. However, the association turned our file over to an unscrupulous attorney who padded the bill by thousands of dollars. The attorney added so much in legal fees that our bill went from $1800 to just over $17,000! This can’t be legal! There is no way we can afford to pay this money and we are very likely going to lose our home. Where can we turn to for help?
Mister Condo replies:
S.O., I am so sorry to hear this. I need to preface my response with the fact that I am not an attorney and offer no legal advice in this column. I would like to say that yours is the worst story I have heard but, alas, it is not. I don’t know the history of you and your association but it merits saying that when the association decided to try to collect their money, they were doing what they felt was best for the association. Common fees are the only source of income for community associations and they must be paid by members like yourselves or the association cannot function. The Board has every right to pursue remedy against you in whatever manner they see fit. However, if the Board is aware that they have engaged an attorney that is going to bury delinquent homeowners with legal fees that are so egregious as to cause the initial debt to soar almost 10 times what is owed the association, then the Board needs to rethink its collection policies and procedures. Keep in mind that should a foreclosure ensue and the association prevail, the Board will only recover the money you owed. All of the other money goes to the attorney. And if the proceeds from the foreclosure do not satisfy the amount due, the Board will have to pay the attorney out of its own funds, meaning that not only won’t they get paid what your owed them, they will actually be out of pocket the outrageous attorney fees as well. This is a “lose/lose” proposition for you and the Board while it is a guaranteed “win” for the attorney. You asked if this is “legal” and my answer is that it is very likely “legal” However, it is highly unethical and completely avoidable. There is a specialized segment of the collection agency business that specializes in the unique debt of home and unit owners who fall behind in their condominium and HOA dues and assessments. Allow me to offer full disclosure here and alert you that I work for just such a company. Stories like yours and others are what drove me into the business. When a collection agency is engaged, it is for one reason: collect the money that is owed by the debtor. When an attorney is engaged, it is for one reason: enforce the security interests of the association. Collection agencies collect; Attorneys litigate. Your association should have engaged with a collection agency to handle your delinquency issue. The company I work for, Axela Technologies, handles all work on a 100% merit-based system, meaning if the collection is not made, Axela does not expect the association to pay for their services. Compare this to the egregious amount charged by the attorney to pursue your small delinquency that may cost you your home and may even cost the association a small fortune to try to collect such a paltry sum. Hiring an attorney for a simple collection process puts the association at risk, which is bad business for the Board. Clearly, it is devastating for you as a homeowner. You may wish to engage an attorney of your own and see if there is any way to have some of the legal fees reduced. However, once your association hired this attorney to handle a matter where they should have engaged with a collection agency, I am afraid the odds of you getting out of this matter relatively unscathed were minimal. All the best!